LOCH FYNE OYSTERS, A CLUSTER OF whitewashed buildings at the head of Loch Fyne, is a place where people smile a lot. Visitors tend to smile because they like the food and the view and the relaxed atmosphere. The employees smile because they own the place.
Smiling is not usually one of the measures tracked by managers, but there is no doubt that the smile count rises when the business is owned not by distant shareholders but by all who work in it.
On 4 April 2003, Loch Fyne Oysters was sold to its employees. Following the death of the company's joint founder and main shareholder, the much-loved Johnny Noble, the company had been up for sale for months. The suitors from outside included a vet, an ex-chicken breeder, a father-and-son fish-farming company and, the front runner – the most knowledgeable and congenial of the four – a large private seafood-processing company based in the north of England. There was a serious risk that if it won, it would move the operation to England, leaving just the Oyster Bar and the shop.
The employees – the only party not advised by a merchant bank – put in the highest bid: just under £4 million. This caused frustration and consternation among bidders and their backers. To the 112 employees, it brought sheer joy.
When one company buys another, the results are often disastrous. Even in purely economic terms, academics have shown repeatedly that acquisitions tend to destroy value. They also tend to destroy people. Managers are sacked to make way for the acquirer's hit men, while employees are "let go" to reduce costs so that the acquirer can attempt, often in vain, to recoup the cash spent on buying the company. Those who are lucky enough to retain their jobs – people who have spent years building up the business, identifying with it, making personal sacrifices far beyond the demands of their contracts – see their ideals betrayed, their hopes for the company and for themselves dashed.
An employee buyout is different. In the early summer of 2003, large wooden signs were hung prominently in the restaurant and the shop, carved with the words: "Loch Fyne Oysters – a company owned and run by its employees." From then on, the same slogan has been printed on every package of seafood dispatched from the head of Loch Fyne.
Employee-owners are different from ordinary employees – they are partners in the enterprise, and will go to extraordinary lengths to achieve success. Employees can almost never afford the cash to buy the company that employs them. But an employee buyout in the form used by Loch Fyne Oysters, financed not with employee money but using a trust funded by the company, can be achieved by almost any firm, of any size, in any business. It sounds too good to be true. But it works.
It was my good fortune to run the Baxi Partnership fund that provided the structure and about half the funding for the Loch Fyne Oysters employee buyout. So far the fund has supported eight companies: six employee buyouts, one employee-owned start-up and one company that was already employee-owned. For some, business has been tough and at least two of them, now profitable and growing, believe that without employee ownership they would no longer be in existence. Others, like Loch Fyne Oysters, have commented on customer interest: many people prefer dealing with a company that will share its profits among the whole community of employees rather than passing it into the hands of distant, already wealthy owners.
I came to run the fund, and so to write Local Heroes, because in 1994 I led the all-employee buyout of Tullis Russell, a paper-making company owned by the family into which I was born. In the process, I saw how people's lives can be changed when they move from being just employees to being employee-owners. I also saw how it led to a sustained improvement in the performance of the business.
The building of a new business is one of the great creative acts of our time, making something people want where there was nothing before. Loch Fyne Oysters had unlikely beginnings, with strange and marvellous characters, people whose story invites sympathy and wonder, laughter and admiration. Like many tales of creative acts, the story of the creation and building up of Loch Fyne Oysters is about people driven by strange compulsions, sleepless with fear, rescued by wholly unexpected strokes of luck, cheerfully risking everything, winning when it seemed impossible, collapsing with exhaustion, sharing whisky round the fire in the evening, arguing a lot, laughing like banshees and loving what they were building. And in the process, coming to love each other, without ever saying so.
Founders Andy Lane (left) and Johnny Noble
Back in 1978, when the venture was established, to fill the four-year gap before the first oysters matured it was decided to farm trout. Rainbow trout would do well in sea water. Founders Johnny Noble and Andy Lane spent virtually all their cash on the cages, and then on the fish to go in them. That winter, for the first time in living memory, the sea loch froze over. Ice gripped the cages. When the tide came in, it lifted them, and when the tide went out, it dragged them down the loch towards deeper water. Eventually the moving ice twisted them, tipped them over and melted, allowing the damaged cages to sink and all the fish to escape.
There was no cash left, and no product to sell. Only the £15,000 insurance money on the cages saved them from bankruptcy. They recovered the warped cages from the sea bed, got them back in place, and restocked them with rainbow trout. That winter the loch froze again and the cages were completely destroyed. This time there was no insurance, and they gave up trout farming. The loch has never frozen since.
A business is, at bottom, a community of people – everyone who works for it. And within the community, a business distributes two things that have caused more violent deaths than anything else in history: power and money. Employee ownership is a quiet revolution, not one that concentrates power and wealth into the hands of the greedy, but one that redesigns the company to distribute understanding, influence and wealth widely. No wonder the smile count rises.
The idea that became Loch Fyne Oysters was borne out of Noble and Lane's desperation. In 1977, these two radically different people were living near the head of Loch Fyne, although they hadn't yet met. They both shared a love for the glorious hills and the loch, the wildness of the place, the closeness to nature, a respect for people with practical skills. They had another thing in common that would transform their lives, and the lives of many people around Loch Fyne and beyond – a deep and increasingly desperate drive to find livelihoods for themselves and their dependents. Noble's dependents were the estate workers, and Lane's were simply a dream, a virtual future family.
Noble was an only son in a grand house dominated by large numbers of female relatives. Educated at Eton, he could hold his own in any company. But the cost of boarding from a young age was often a lack of ability to express tender emotion, perhaps even to experience the more vulnerable feelings that were so dangerous to expose. He never married, was never seen with a girlfriend, gave no public sign of a love life. When he talked, which he did well, often in a loud voice, he would manoeuvre carefully around combinations of sibilants that might trigger his stutter – perhaps the only outward sign of a buried interior life.
In 1972 his father died. As the only boy, he inherited the Ardkinglas estate with its glorious house at the head of the loch. But it turned out that his father had been borrowing heavily against the estate, and with it came huge debts, greatly increased by inheritance tax, which had not been planned against.
As a boy among his country relatives, Andy Lane knew he was loved, but his boyhood passed in less flamboyantly sociable surroundings than Johnny Noble's, and he was more of a loner. When he was two years old, his brother was seven and his sister nine. His sister contracted polio and suddenly died. Their father never recovered. It was the 1950s and grief was not a public affair, even within the family. For the young boy growing up, his father's moods created a puzzle he was left to work out for himself.
After university, where he specialised in marine biology, he jumped at the chance to head into the wilds of western Scotland to work at a salmon farm. In those early days it was possible to believe that salmon farming would save the wild salmon. It would also let him stand on his own feet, with an income of his own. He hoped that what people said about having a job was true: it would connect him to other people, give him a role in life, be fulfilling. For a brief moment, at the beginning, he felt that optimism. It would engage him as an autonomous human being and empower him.
But it didn't.
The only autonomy left once he had taken the job was the ability to leave, to give it up again. It was true that he had some money at the end of the week, and in this fairly small company he quickly got to know everyone and was treated pretty decently. But the small company was owned by a bigger one, which was owned by an even bigger one.
Lane knew he was establishing a hatchery which, when successful (and it was looking good), would save the company money as well as providing a more secure supply of young salmon. He knew he would not personally share in the profit this created, but he still felt proud of a job well done. Increasingly, however, he felt uneasy at the great corporate structure above them that had the power to make all the big decisions, to direct what they did, and to suck away the money they made.
With this developing understanding, Lane no longer felt lucky to have his job. He even found himself wondering if it was sensible to work as hard as he was doing. Once the hatchery was set up and stable, they might not need to keep him employed. In this frame of mind, when he was grading the salmon they had a knack of slipping out of his hands into the overflow pipe into the loch, to freedom. The protest was secret, but satisfying none the less.
Although it was wonderful to be living in the wild and wacky west, as he thought of it, and although there were times of sheer joy in the hills and along the shores of the loch, conditions were not great for attracting a mate. His caravan was ramshackle, with a leaking, plastic roof-hatch that blew off in storms. Once, over a period of months he had a headache every morning. Then on a quiet evening as he was cooking on the tiny gas stove he heard a hissing sound and discovered that a gas pipe had not been properly sealed. Every time he used the stove it was filling the caravan with gas. The fact that he had not been poisoned or blown up owed less to good fortune perhaps than to the fact that the caravan was so pitifully draughty.
This narrow escape crystallised his thinking: he had to get out. Might he not find a way to work for himself? It seemed impossible, but the idea settled at the back of his mind.
Ideas themselves are not enough to change anything: for a new idea to have a meaningful impact, there has to be a real psychological drive behind it. Otherwise the idea simply floats into the mind, into a conversation or a daydream, and floats away again into oblivion, or perhaps recurs as no more than an occasional fantasy.
These two men, Johnny Noble and Andy Lane, still strangers to each other, stalked around the head of Loch Fyne, primed to burst into creative activity. They met casually, when Noble, looking like an artist dressed in an old smock and a black beret, wandered down to the salmon hatchery on his land, where Lane was working. The two men got on well, and soon were exchanging Lane's dived scallops for Noble's fine wine, then consuming them together. That meeting was the trigger for an explosive new beginning.
• Local Heroes: Harvesting Success the Loch Fyne Way by David Erdal is published by Viking, priced £14.99.
